What is the minimum interest rate that the IRS will allow on a home mortgage?
United States
SCOTT R asked:
The IRS sets a minimum rate that can be charged for a home mortgage. That number has a special name which escapes me. Anybody know?
The IRS sets a minimum rate that can be charged for a home mortgage. That number has a special name which escapes me. Anybody know?
Thanks
Caffeinated Content
September 7th, 2008 at 9:16 am
You may be talking about the imputed interest rules.
If you are receiving or making payments for a loan or installment sale, but little or no interest is stated on the contract, the IRS assumes a rate of interest based on the published applicable federal rate. For instance, if you sold some land on an installment sale and agreed to receive the payments over a 10-year period interest free, the IRS would determine that part of your sales price was actually interest and calculate the interest amount based on the applicable federal rate.
There are some loans exempt from the imputed interest rules, (1) the $10,000 gift loan exception and (2) the $100,000 gift loan exception. See irs.gov for details.
Hope this helps.